announcement of financial results 2006• with effect from april 10, 2007, the bg bank division will...

DANSKE BANK ANNOUNCEMENT OF FINANCIAL RESULTS 2006 1/42

Announcement of financial results 2006

Stock Exchange Announcement No. 4/2007 January 31, 2007


3 Danske Bank Group financial highlights 4 Review 4 Financial results 5 Capital and solvency 5 Balance sheet 6 Sampo Bank 9 Outlook for 2007 10 Business areas 11 Banking Activities Danske Bank 13 Banking Activities BG Bank 15 Banking Activities Sweden 17 Banking Activities Norway 19 Banking Activities Northern Ireland 21 Banking Activities Ireland 23 Other Banking Activities 24 Mortgage Finance 26 Danske Markets 28 Danske Capital 30 Danica Pension 32 Other areas 34 Accounting policies 35 Accounts of the Danske Bank Group 35 Income statement 36 Balance sheet 37 Capital 39 Cash flow statement 40 Segment reporting

42 Additional information This Announcement of financial results 2006 is a translation of the original announcement in the Danish language (Årsregn- skabsmeddelelse 2006). In case of discrepancies, the Danish version prevails.


Danske Bank Group financial highlights

NET PROFIT FOR THE YEAR (DKr m) 2006 2005 2004 2003 2002

Net interest income 19,501 17,166 14,752 15,593 15,859Net fee income 7,301 7,289 5,898 5,910 5,842Net trading income 6,631 6,351 4,732 5,074 4,971Other income 2,698 2,255 2,029 1,127 1,278Net income from insurance business 1,355 1,647 1,657 1,958 268

Total income 37,486 34,708 29,068 29,662 28,218Operating expenses 19,485 18,198 15,393 14,964 15,634

Profit before credit loss expenses 18,001 16,510 13,675 14,698 12,584Credit loss expenses -496 -1,096 759 1,662 1,420

Profit before tax 18,497 17,606 12,916 13,036 11,164

Tax 4,952 4,921 3,690 3,750 2,922

Net profit for the year 13,545 12,685 9,226 9,286 8,242

Attributable to minority interests -12 4 28 - -

BALANCE SHEET AT DEC. 31 (DKr m)

Bank loans and advances 1,054,322 829,603 615,238 523,055 478,840Mortgage loans 602,584 569,092 524,428 497,563 469,506Trading portfolio assets 490,954 444,521 422,547 588,986 545,719Investment securities 26,338 28,712 31,505 - -Assets under insurance contracts 194,302 188,342 163,205 - -Other assets 370,861 371,718 295,584 216,530 257,488

Total assets 2,739,361 2,431,988 2,052,507 1,826,134 1,751,553

Due to credit institutions and central banks 564,549 476,363 353,369 299,880 319,573Deposits 702,943 631,184 487,863 483,884 427,940Issued mortgage bonds 484,217 438,675 432,399 603,120 567,912Trading portfolio liabilities 236,524 212,042 215,807 142,992 162,453Liabilities under insurance contracts 215,793 212,328 191,467 - -Other liabilities 391,212 343,470 271,214 202,258 182,146Subordinated debt 48,951 43,837 33,698 33,549 31,210Shareholders' equity 95,172 74,089 66,690 60,451 60,319

Total liabilities and equity 2,739,361 2,431,988 2,052,507 1,826,134 1,751,553

RATIOS AND KEY FIGURES

Net profit for the year per share, DKr 21.5 20.2 14.4 13.3 11.5Diluted net profit for the year per share, DKr 21.4 20.2 14.4 - -Net profit for the year as % of average shareholders' equity 17.5 18.4 13.9 15.2 14.0Cost/income ratio, % 52.0 52.4 52.7 50.4 55.4Solvency ratio, incl. net profit for the year, % 11.4 10.3 10.2 11.0 10.5Core (tier 1) capital ratio, incl. net profit for the year and hybrid core capital, % 8.6 7.3 7.7 7.7 7.6Risk-weighted items, end of year, DKr bn 1,119 944 808 767 774Share price, end of year, DKr 250.0 221.2 167.5 138.8 117.4Book value per share, DKr 139.1 118.2 106.7 89.9 84.8Full-time-equivalent staff, end of year 19,253 19,162 16,235 16,935 17,817

For 2004-2006, items are valued in accordance with the IFRS. For 2002-2003, items are valued in accordance with the rules in force at that time.


Review• Profit after tax up 7% to DKr13,545m, against DKr12,685m in 2005 • Income rose 8% due to substantial demand for the Group’s products • Net positive entry for credit loss expenses of DKr496m • New capital targets as a result of the new capital adequacy rules and the purchase of Sampo Bank • Profit before credit loss expenses for 2007 expected to roughly match the level recorded in 2006,

including pro forma consolidation of Sampo Bank • With effect from April 10, 2007, the BG Bank division will merge with the Danske Bank division Financial results In 2006, the Danske Bank Group realised a net profit of DKr13,545m, against DKr12,685m in 2005. Pre-tax profit amounted to DKr18,497m, which was better than expected at the presentation of the report for the first nine months of 2006. The result constituted an increase of 5% relative to the pre-tax profit recorded in 2005. The growth in profit generated by the Group’s banking activities out-performed the growth rate realised by the segment in 2005. Income The positive trend in income continued in 2006. Income rose by DKr2,778m, or 8%, on the level recorded a year ago to DKr37,486m. Income from banking activities grew by DKr3,068m, of which Northern Bank and National Irish Bank accounted for DKr848m. The accounts for 2006 include the financial results of the Group’s activities in Northern Ireland and the Republic of Ireland for the full year as opposed to the accounts for 2005, which covered only the period from March to December for these markets. Net interest income rose 14% to DKr19,501m. Excluding net interest income from Northern Bank and National Irish Bank, the increase amounted to 11%. The positive trend in net inter-est income was due to continued lending growth, which more than compensated for the narrowing of lending margins. Home financing products se-cured on real property and lending to corporate customers accounted for the largest shares of growth. Higher interest rates contributed to a wid-ening of deposit interest margins. Net fee income remained stable at the level re-corded in 2005. The increase in fee income of 7% generated by the Group’s banking activities could not compensate for the decline in income from mortgage lending owing primarily to the fact that the record-high refinancing activity in 2005 re-turned to a more normal level in 2006.

Net trading income rose by 4% to DKr6,631m. Net trading income in 2005 also included one-off in-come of around DKr0.8bn. Excluding the one-off income, net trading income rose 19%. The in-crease was attributable to customer-driven activi-ties and an improved investment return. The increase in other income of 20% to DKr2,698m was owing primarily to leasing and real-estate agency business. Net income from insurance business fell from DKr1,647m in 2005 to DKr1,355m. The increase in business volume could not compensate for profit policy adjustments and the booking of risk allow-ance from previous years in the fourth quarter of 2005. The health and accident business showed improvement, but the result remained unsatisfac-tory. Operating expenses Operating expenses rose by 7% to DKr19,485m. Excluding the expenses of acquired units, the increase amounted to 1.6% due to a generally higher level of activity. The cost/income ratio improved from 52.4% to 52.0%. Credit loss expenses As in 2005, the Group recorded a net positive entry for credit loss expenses. The positive result, which amounted to DKr496m, against DKr1,096m in 2005, reflected the persistently favourable eco-nomic conditions that led to a low level of new impairment charges and reversals of charges pre-viously made. Tax The Group’s tax charge for 2006 is calculated to be DKr4,952m, corresponding to an effective tax rate of 27%.


Return on equity The return on equity stood at 17.5%, against 18.4% in 2005. Net profit for the year per share increased from DKr20.2 to DKr21.5, or 6%. Capital and solvency Share capital At the end of 2006, the share capital totalled DKr6,988,042,760, and shares numbered 698,804,276. This number includes the issue of 60,500,000 shares in November 2006 to fund the acquisition of Sampo Bank. The number of shares outstanding at the end of 2006 was 684,286,799, and the average number of shares outstanding in 2006 was 631,445,484. Shareholders' equity Shareholders’ equity was DKr95bn at the end of 2006, against DKr74bn at the end of 2005. The change reflects primarily the share issue, the rec-ognition of the profit for the year and the dividend payment in March 2006. The Board of Directors is proposing that the gen-eral meeting approve a dividend of DKr7.75 per share, or 40% of the net profit of the Group, corre-sponding to a total dividend payment of DKr5,416m. Solvency The solvency ratio at the end of 2006 was 11.4%, of which 8.6 percentage points derived from the Group’s core (tier 1) capital, against 10.3% and 7.3%, respectively, at the end of 2005. The core (tier 1) capital ratio, excluding hybrid core capital, amounted to 7.6%, against 6.6% in 2005. Both the solvency ratio and the core (tier 1) capital ratio benefited from the proceeds from the share issue. Excluding the proceeds, the solvency ratio and the core (tier 1) capital ratio stood at 10.1% and 6.3%, respectively, at the end of 2006. The increase in risk-weighted items from DKr944bn at the end of 2005 to DKr1,119bn at the end of 2006 was attributable primarily to lending growth and the equity forward contract worth around DKr30bn that will run until the acquisi-tion of Sampo Bank has been finalised. Capital targets Danske Bank Group changed its capital targets in connection with the acquisition of Sampo Bank.

The adjustments should be seen in light of the large share of the Group’s loan portfolio for which security has been provided, the coming imple-mentation of the new Capital Requirements Direc-tive (CRD) and the Group’s greater geographical diversification resulting from the acquisition of Sampo Bank. The capital targets were changed to a core (tier 1) capital ratio, excluding hybrid core capital, of 5.5-6.0%; a hybrid core capital ratio of 1.0-1.5%; and a solvency ratio of 9.0-10.0%. The payout ratio target is maintained at 30-50%, and the Group expects to maintain the payout ratio for the 2007 financial year at 40% of the net profit. CAPITAL TARGETS (%) NEW PREVIOUS

Core (tier 1) capital ratio, excluding hybrid core capital 5.5-6.0 6.0-6.5 Hybrid core capital ratio 1.0-1.5 0.5-1.0 Solvency ratio 9.0-10.0 9.0-10.0 Payout ratio 30-50 30-50

Balance sheet Lending Bank lending, excluding reverse transactions, rose by DKr140bn, or 23%, from the end of 2005 to DKr760bn at the end of 2006. Loans and advances, excluding reverse transac-tions, extended by the Group's banking operations in Denmark rose by DKr52bn, or 20%. Loans and advances extended by the Group’s non-Danish banking operations grew by DKr85bn, or 26%. Northern Bank and National Irish Bank ac-counted for DKr35bn of the increase; DKr13bn of this amount was owing to the fact that loans and advances are no longer netted against deposits held by the same customers. Lending by Danske Markets rose DKr6bn, or 18%, from the end of 2005. Lending at Danske Markets comprises facilities with selected corporate and institutional clients. Mortgage loans measured at fair value stood at DKr603bn at the end of 2006, up 6% on the level recorded a year before. The private market ac-counted for 62% of the mortgage loan portfolio at the end of the year, and the nominal outstanding bond debt rose by DKr46bn to DKr609bn.


Bank loans and advances to retail customers rose by 16%, whereas loans and advances to corporate customers grew by 26% on the figure recorded a year earlier. Reverse transactions were up DKr85bn from the level at the end of 2005 to DKr295bn, primarily as a result of increased activity in the international repo market. Deposits Deposits, excluding repo transactions, totalled DKr599bn, against DKr533bn at the end of 2005, a rise of 12%. Deposits, excluding repo transac-tions, at the Group's banking operations in Den-mark rose by DKr24bn, or 8%, from the end of 2005. Deposits at the Group’s non-Danish banking operations grew by DKr42bn, or 28%. Deposits at Northern Bank accounted for DKr20bn of the in-crease; DKr13bn of this amount was owing to the fact that loans and advances are no longer netted against deposits held by the same customers. Trading portfolio assets Trading portfolio assets rose by DKr46bn, or 10%, from DKr445bn at the end of 2005 to DKr491bn. The increase was owing to larger bond holdings. The Group uses the Value-at-Risk (VaR) measure to determine the daily market risk of its expo-sures. VaR expresses, at a confidence level of 99%, the maximum amount that the Group would lose assuming that the exposure was maintained for 10 days. Excluding Danica Pension, the Group’s interest VaR amounted to DKr84m at the end of 2006, against DKr132m a year earlier. Integration of Northern Bank and National Irish Bank At the end of 2006, the Group had realised half of the estimated synergies of DKr350m. The Group expects to realise all estimated synergies by the end of 2007, with full accounting effect from 2008. Overall integration costs are expected to total some DKr1.5bn. At the end of 2006, costs realised totalled DKr1.4bn, of which DKr0.2bn had been recognised as development costs under intangible fixed assets. Costs for the completion of the inte-gration process are expected to be realised by the end of 2007.

Merger of BG Bank and Danske Bank Danske Bank Group has decided to gather the activities of BG Bank and Danske Bank Denmark in a single banking division with the name Danske Bank. The two brands have become so similar that there are no longer good grounds for maintaining two separate banking operations. The change will take effect on April 10, 2007, when all building facades and printed matter from the Bank will bear the Danske Bank name. The merger of the two divisions is expected to entail a one-off expenditure of DKr275m. The Group expects to be able to save DKr300m each year through the merger, with full accounting effect in 2010. In 2007, the merger is expected to be cost-neutral. Sampo Bank In November 2006, Danske Bank entered into an agreement to buy all the shares of Sampo Bank of Finland. The purchase price was €4.05bn. The purchase was approved at the end of January 2007, which means that Sampo Bank was not con-solidated in the 2006 accounts of Danske Bank. With the purchase of Sampo Bank, the Danske Bank Group strengthens its position as a competi-tive player on the entire Nordic market. The in-vestment in Finland is in line with the Group’s strategy of expanding its retail banking activities in northern Europe. Danske Bank expects to complete the integration of Sampo Bank’s Finnish activities on its IT plat-form at Easter 2008. It has not yet been decided when to integrate the still relatively small opera-tions in Estonia, Latvia, Lithuania and Russia. Sampo Bank will be adjusted to Danske Bank’s organisational structure, and its administrative functions will be integrated on the Group's inter-national platform. Sampo Bank will continue to operate under its own brand name. Profile Sampo Bank is Finland's third-largest bank. It has subsidiaries in Estonia, Latvia and Lithuania and recently acquired a small bank in Russia.


Sampo Bank has 125 branches in Finland and about 3,500 employees. Its subsidiaries in Estonia, Latvia and Lithuania have a total of 33 branches and some 1,100 employees. Sampo Bank’s business focus is on retail custom-ers, small and medium-sized business customers and institutional clients. With 1.1 million retail customers and 100,000 cor-porate customers, Sampo Bank holds 15% of the retail market and 20% of the corporate market in Finland. Most of the bank’s business with retail customers is within home financing.

Sampo Bank is technologically advanced and has 800,000 online banking customers.

Most of the bank’s business originates in Finland, but the subsidiaries in Estonia, Latvia and Lithua-nia have seen considerable growth and rising mar-ket shares within home financing in particular. Sampo Bank is the third-largest foreign bank in the Baltic region.

In 2006, Sampo Bank took over Industry and Fi-nance Bank in St. Petersburg with a view to ex-panding its potential for serving large Finnish cor-porate customers doing business in Russia.

The future With the purchase, Danske Bank expects to create a very strong basis for future growth.

Furthermore, the acquisition will support Danske Bank’s business platform and help create value for the Bank’s shareholders. Danske Bank expects the purchase of Sampo Bank to have a positive effect on its earnings per share from the second half of 2008.

The integration of Sampo Bank on Danske Bank’s IT platform and the organisation of the administra-tive functions are estimated to generate annual cost and funding synergies of DKr0.6bn (DKr0.1bn in 2007, DKr0.3bn in 2008 and DKr0.2bn in 2009), with full accounting effect from 2010.

Until 2009, Danske Bank expects to incur expenses for the integration of Sampo Bank’s activities of DKr1.6bn, which break down into DKr0.5bn in 2007, DKr0.8bn in 2008 and DKr0.3bn in 2009.

Purchase price The purchase price for Sampo Bank was €4.05bn, or DKr30.2bn. Expenses amount to DKr0.6bn: DKr0.5bn for share transfer tax and DKr0.1bn for consultants’ fees and similar expenses. The fair value of the net assets of Sampo Bank is currently estimated at DKr9.3bn. The remainder of the purchase price includes DKr4.4bn for relations with deposit customers and DKr0.3bn for relations with other customers. The amortisation periods are expected to be fixed at 10 years and 5 years, respectively. The right to the business name is considered to have an indefinite economic life and is currently valued at DKr0.3bn. Conse-quently, goodwill is estimated at DKr17.8bn.

PRELIMINARY BREAKDOWN OF PURCHASE PRICE

(DKr bn)

Purchase price 30.2Costs 0.6

Total purchase price 30.8Net assets (excluding the items below) 9.3Customer relations (deposits) 4.4Other customer relations 0.3Right to name 0.3Deferred tax -1.3Goodwill 17.8


Pro forma financial highlights for 2006 The table below shows selected financial high-lights on the assumption that Sampo Bank had been acquired with effect from January 1, 2006. The figures for Sampo Bank are based on the aver-age of the estimates for Sampo Bank’s financial results for 2006 provided by four equity analysts. The presentation does not factor in amortisation of intangible assets, integration expenses and fi-nance costs.

The Group will publish financial highlights for 2006 for the pro forma consolidated Group once the purchase is completed and Sampo Bank has presented its accounts for 2006 and the opening balance sheet.

PRO FORMA 2006

PRE-TAX PROFIT FOR THE YEAR (DKr m) DANSKE BANK GROUP SAMPO BANK CONSENSUSTOTAL DANSKE BANK GROUP

AFTER ACQUISITION (PRO FORMA)

Net interest income 19,501 2,789 22,290Net fee income 7,301 1,913 9,214Net trading income 6,631 869 7,500Other income 2,698 403 3,101Net income from insurance business 1,355 - 1,355

Total income 37,486 5,974 43,460Operating expenses 19,485 3,274 22,759

Profit before credit loss expenses 18,001 2,700 20,701Credit loss expenses -496 -4 -500

Profit before tax 18,497 2,704 21,201


Outlook for 2007 The Group’s outlook for 2007 is based on the pro forma financial highlights for 2006 shown on page 8. The year 2007 is expected to be another satisfac-tory year for Danske Bank Group. At the outset of 2007, the Danske Bank Group had further strengthened its market position through the acquisition of the Sampo Bank group and its continued focusing and streamlining of the Group organisation. In 2007, Europe is likely to see a rise in average interest rates and moderate economic growth. The Group expects growth in its principal markets to continue to outperform average euro-zone growth, although at a lower level than in 2006. Net interest income is expected to rise by 8-10%, primarily as a result of double-digit lending growth in the markets on which the Group oper-ates and the likely rise in average interest rates. Net fee income is expected to be slightly higher than in 2006, due mainly to an increase in trading volume on the securities markets and despite expenses for the credit default swaps entered into in connection with the financing of the acquisi-tion of Sampo Bank. Mortgage finance activities are expected to remain unchanged. Net trading income is expected to be 7-9% lower than the high level recorded in 2006. The Group expects to maintain its market position, but trad-ing income will continue to depend greatly on trends in the financial markets, including the level of securities prices at the end of the year. Other income is likely to fall by 12-17% as the Group does not expect to realise income from the sale of property on the scale recorded in 2006. The Group does not expect to achieve an invest-ment return from its insurance business similar to the high return generated in 2006. Overall, net income from insurance business is expected to fall by 13-15%. This result will, however, also depend greatly on trends in the financial markets. The Group expects operating expenses to rise by 4-6%. The increase is attributable primarily to integration costs, the amortisation of intangible assets associated with the acquisition of Sampo Bank and the general increase in salaries and in-flation. Excluding integration costs and amortisa-

tion of intangible assets associated with Sampo Bank, operating expenses are expected to increase by 1-3%. Profit before credit loss expenses is expected to roughly match the level recorded in 2006. The Group does not expect to realise a net posi-tive entry for credit loss expenses as was the case in 2006. However, the Group assumes favourable economic trends and satisfactory loan portfolio quality and therefore expects to record relatively modest credit loss expenses in 2007. Profit before tax for 2007 is therefore expected to be somewhat lower than the level in 2006. The Group expects its tax rate to be 27%. DANSKE BANK, INCL.

SAMPO BANK 2006

(PRO FORMA) (DKr m) OUTLOOK

2007 (%)

Net interest income 22,290 8 - 10Net fee income 9,214 0 - 2Net trading income 7,500 (7) - (9)Other income 3,101 (12) - (17)Net income from insurance business 1,355 (13) - (15)

Total income 43,460 0 - 2

Total operating expenses 22,759 4 - 6

Profit before credit loss expenses 20,701 (2) - 0

( ) denotes a fall.


Business areas

PROFIT BEFORE TAX Index Share (%) Share (%)(DKr m) 2006 2005 06/05 2006 2005

Banking Activities Danske Bank 5,772 5,767 100 31 33Banking Activities BG Bank 1,992 1,782 112 11 10Banking Activities Sweden 1,013 809 125 5 5Banking Activities Norway 885 579 153 5 3Banking Activities Northern Ireland -104 23 - -1 -Banking Activities Ireland 26 -106 - - -1Banking Activities England, USA and other units - 528 - - 3Other Banking Activities 1,308 713 183 7 4

Total Banking Activities 10,892 10,095 108 59 57

Mortgage Finance 2,710 2,755 98 15 16Danske Markets 3,639 3,719 98 20 21Danske Capital 560 509 110 3 3Danica Pension 1,355 1,647 82 7 9Other areas -659 -1,119 - -4 -6

Total Group 18,497 17,606 105 100 100

The 2005 results of Banking Activities Northern Ireland and Banking Activities Ireland comprise the months March to December only.

INCOME Index Share (%) Share (%)(DKr m) 2006 2005 06/05 2006 2005

Banking Activities Danske Bank 10,989 9,973 110 29 29Banking Activities BG Bank 4,481 4,151 108 12 12Banking Activities Sweden 2,544 2,032 125 7 6Banking Activities Norway 2,406 1,837 131 6 5Banking Activities Northern Ireland 2,293 1,810 - 6 5Banking Activities Ireland 1,118 753 - 3 2Banking Activities England, USA and other units - 468 - - 1Other Banking Activities 2,625 2,364 111 7 7

Total Banking Activities 26,456 23,388 113 71 67

Mortgage Finance 3,781 3,879 97 10 11Danske Markets 5,535 5,491 101 15 16Danske Capital 1,026 893 115 3 3Danica Pension 1,355 1,647 82 4 5Other areas -667 -590 - -2 -2

Total Group 37,486 34,708 108 100 100

The pre-tax profit of the Group's banking activi-ties rose 8% on the 2005 figure. Banking activities accounted for 59% of the Group’s pre-tax profit in 2006, against 57% in 2005.

The results of the individual business areas are described in the following pages.


Banking Activities Danske Bank Banking Activities Danske Bank encompasses the banking activities of the Danske Bank division in Denmark. Danske Bank caters to all types of retail and corporate customers. Danske Bank’s finance centres serve large corporate and private banking customers. Banking Activities Danske Bank has nine regions with 286 branches, nine finance centres and nearly 4,300 employees.

BANKING ACTIVITIES DANSKE BANK Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 6,997 6,184 113 1,891 1,792 1,713 1,601 1,596Net fee income 3,489 3,319 105 836 770 904 979 885Net trading income 497 455 109 116 117 127 137 121Other income 6 15 40 2 3 - 1 3

Total income 10,989 9,973 110 2,845 2,682 2,744 2,718 2,605Operating expenses 5,443 5,168 105 1,419 1,293 1,365 1,366 1,344

Profit before credit loss expenses 5,546 4,805 115 1,426 1,389 1,379 1,352 1,261Credit loss expenses -226 -962 - 157 16 -156 -243 -710

Profit before tax 5,772 5,767 100 1,269 1,373 1,535 1,595 1,971

Loans and advances, end of period 238,631 197,674 121 238,631 224,786 221,065 208,056 197,674Deposits, incl. pooled deposits, end of period 236,439 216,219 109 236,439 227,746 228,992 224,330 216,219Risk-weighted items (avg.) 217,030 186,653 116 224,796 223,070 215,864 204,097 197,383Allocated capital (avg.) 14,107 12,132 116 14,612 14,500 14,031 13,266 12,830

Pre-tax profit as % p.a. of allocated cap. 40.9 47.5 34.7 37.9 43.8 48.1 61.5Cost/income ratio, % 49.5 51.8 49.9 48.2 49.7 50.3 51.6

• Pre-tax profit at unchanged level • Profit before credit loss expenses rose 15% • Net positive entry for credit loss expenses • Lending increased 21% • High level of activity and persistently fierce

competition expected in 2007 The market in 2006 In 2006, as in 2005, the economic climate in Denmark was favourable and generated consider-able demand for financial products and services. Interest rates rose throughout the year, but lend-ing margins remained under pressure because of persistently keen competition. Trading volume on the securities markets was substantial in the first quarter of the year, but returned to more normal levels in the remainder of the year. The bank’s market share at end-2006 was un-changed from the level at the end of 2005. Income Net interest income advanced 13% to DKr6,997m. The higher net interest income resulted partly from continued growth in lending, which more than offset the compression of lending margins, and partly from an interest rate-driven widening of deposit margins. Home financing products se-cured on real property and increased lending to corporate customers accounted for most of the growth in lending.

Net fee income rose 5% in 2006, mainly because of heavy trading volume on the securities markets in the first quarter; equity trading in particular generated good results. Danske Bank was also the lead manager of a number of issues, and these contributed significantly to the rise in net fee in-come. Operating expenses The 5% increase in operating expenses reflected costs relating to enhancement of the bank’s IT systems and growth in activity-based expenses. The rise in income led to an improvement of the cost/income ratio to 49.5%. Credit loss expenses Banking Activities Danske Bank recorded a net positive entry for credit loss expenses of DKr226m, against a net positive entry of DKr962m in 2005. The trend was attributable to a persis-tently favourable economic climate and the high credit quality of the loan portfolio. Lending Total lending rose 21% on the level recorded at end-2005. Lending to retail customers was up 17%, primarily because of satisfactory sales of home financing products. Generally stronger de-mand for credit facilities among corporate cus-tomers lifted lending to this segment by 23%.


Deposits Deposits rose 9% on the 2005 figure. Retail cus-tomer deposits were up 6%, while corporate cus-tomer deposits rose 14%. Local initiatives In 2006, Danske Bank continued its strategy of branding itself as a nation-wide bank with strong community commitment. Through Danske Initia-tive Funds, the bank provided more than DKr4m in sponsorship funding for local initiatives within knowledge, culture and sports. The bank also brought local talent into focus, awarding 160 grants to students going abroad to study. Market outlook for 2007 The healthy economic climate in Denmark is ex-pected to continue in 2007, although with growth rates lower than in 2006. The bank is therefore likely to maintain a high level of activity despite persistently fierce competition. Danske Bank Group has decided to gather the activities of BG Bank and Danske Bank Denmark in a single banking division with the name Dan-ske Bank. After the merger with BG Bank, Danske Bank’s 2.2 million customers will be able to access the bank at 431 branches, about 1,000 ATMs and post of-fices throughout the country. Customers can also take advantage of personal telephone service and eBanking facilities 24 hours a day, 365 days a year.


Banking Activities BG Bank

Banking Activities BG Bank encompasses the banking activities of the BG Bank division in Denmark. BG Bank caters to all types of retail customers and most types of corporate customers through its branch network. BG Bank also serves a number of agricultural customers at special agricultural centres. Banking Activities BG Bank has seven regions with 172 branches, two investment desks and nearly 1,900 em-ployees. With effect from April 10, 2007, the BG Bank division will form part of the Danske Bank division. BANKING ACTIVITIES BG BANK Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 2,971 2,685 111 802 763 724 682 686Net fee income 1,324 1,306 101 313 304 326 381 349Net trading income 178 149 119 38 41 46 53 43Other income 8 11 73 5 1 1 1 3

Total income 4,481 4,151 108 1,158 1,109 1,097 1,117 1,081Operating expenses 2,426 2,392 101 635 585 597 609 630

Profit before credit loss expenses 2,055 1,759 117 523 524 500 508 451Credit loss expenses 63 -23 - -73 43 29 64 -10

Profit before tax 1,992 1,782 112 596 481 471 444 461

Loans and advances, end of period 75,312 63,803 118 75,312 71,929 69,689 65,738 63,803Deposits, incl. pooled deposits, end of period

78,724 74,607 106 78,724 76,338 75,619 73,039 74,607

Risk-weighted items (avg.) 66,788 58,968 113 70,500 68,876 64,998 62,669 61,259Allocated capital (avg.) 4,341 3,833 113 4,583 4,477 4,225 4,073 3,982


• Pre-tax profit up 12% • Profit before credit loss expenses rose 17% • Credit loss expenses attributable to a few indi-

vidual facilities • Lending increased 18% • BG Bank will in future form part of the Danske

Bank division The market in 2006 In 2006, as in 2005, the economic climate in Denmark was favourable and generated consider-able demand for financial products and services. Interest rates rose throughout the year, but lend-ing margins remained under pressure because of the keen competition. Trading volume on the securities markets was substantial in the first quarter of the year, but returned to more normal levels in the remainder of the year. The bank’s market share at end-2006 was un-changed from the level at the end of 2005. Income Net interest income rose 11% on the figure re-corded in 2005. The higher net interest income resulted partly from continued growth in lending, which more than offset the compression of lend-ing margins, and partly from an interest rate-driven widening of deposit margins. The narrower lending margins reflected an increasing percent-

age of loans secured on real property and fierce competition. Net fee income was up 1%, mainly because of considerable trading volume on the securities markets in the first quarter of 2006. BG Bank’s investment desks also achieved substantial earn-ings on currency trading and investment services. Refinancing fees were lower, however, because of the decrease in refinancing activity. Operating expenses Operating expenses rose 1% on the figure for 2005. The rise was due to costs relating to en-hancement of BG Bank's IT systems. An increase in income led to an improvement of the cost/income ratio to 54.1%, down from 57.6% in 2005. Credit loss expenses Credit loss expenses amounted to DKr63m, against a net positive entry of DKr23m in 2005. The loss was attributable to a few individual fa-cilities. Lending Total lending rose 18% on the level recorded for 2005. Lending to retail customers grew 17%. This growth came primarily from healthy sales of the home financing product Bolig Plus. A general increase in demand for credit facilities among


corporate customers lifted lending to this segment by 19%. Deposits Deposits rose 6% on the 2005 figure. Retail cus-tomer deposits were up 3%, while corporate cus-tomer deposits rose 13%. Retail investing In October 2006, BG Bank launched two new of-fers to retail customers investing in securities: To self-service customers, BG Bank now offers its eBanking product BG Investering Online, and for customers who invest with the assistance of an adviser, a new and more simplified brokerage structure has been set up. Merger of BG Bank and Danske Bank Danske Bank Group has decided to gather the activities of BG Bank and Danske Bank Denmark in a single banking division with the name Dan-ske Bank. The change will mean that 60 branch offices of BG Bank and Danske Bank will merge into 30 branches during the spring. These are branches that are located very close to each other. Custom-ers will continue to be served by the advisers they know because the advisers will move to the con-tinuing branch. The change will take effect on April 10, 2007, when all building facades and printed matter from the Bank will bear the Danske Bank name.


Banking Activities Sweden Banking Activities Sweden encompasses the banking activities of Östgöta Enskilda Bank and Provinsbankerne in Sweden, which serve all types of retail and corporate customers. Banking Activities Sweden has four regions with 59 branches, four finance centres and nearly 1,150 employees. Real-estate agency business is carried out primarily through the 70 offices of Skandia Mäklarna.

BANKING ACTIVITIES SWEDEN Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 1,812 1,474 123 505 473 434 400 383Net fee income 614 485 127 176 137 158 143 140Net trading income 71 54 131 20 20 15 16 18Other income 47 19 247 15 12 13 7 13

Total income 2,544 2,032 125 716 642 620 566 554Operating expenses 1,460 1,257 116 394 351 374 341 346

Profit before credit loss expenses 1,084 775 140 322 291 246 225 208Credit loss expenses 71 -34 - 31 7 -50 83 9

Profit before tax 1,013 809 125 291 284 296 142 199

Profit before tax in local currency (SKr) 1,253 1,012 124 356 353 366 178 252

Loans and advances, end of period 138,454 113,964 121 138,454 133,499 128,151 116,709 113,964Deposits, end of period 50,062 37,329 134 50,062 45,917 44,537 39,472 37,329Risk-weighted items (avg.) 106,104 84,194 126 114,843 110,053 102,850 96,425 90,936Allocated capital (avg.) 6,897 5,473 126 7,465 7,153 6,685 6,268 5,911


• Pre-tax profit up 25% • Profit before credit loss expenses rose 40% • Lending increased 17% in local currency • Growth expected to continue in 2007 The market in 2006 In 2006, as in 2005, the economic climate in Swe-den was favourable and generated considerable demand for financial products and services. The market was highly competitive in 2006, and lend-ing margins remained under pressure despite the gradual rise in interest rates during the year. The market share of Banking Activities Sweden improved in 2006 to 5.6% for lending and 4.3% for deposits, against 5.3% and 3.9%, respectively, in 2005. Income Net interest income increased 23% over the 2005 figure as a result of high lending growth – which more than compensated for the narrower lending margins – and a small, interest rate-driven widen-ing of deposit margins. In addition to fierce com-petition, the narrowing of lending margins was due to a higher proportion of home financing products and increased lending to corporate cus-tomers.

Net fee income rose 27% owing to the larger busi-ness volume and extensive securities trading. Operating expenses Operating expenses rose 16%, reflecting the higher level of activity, including the expansion of the branch network in 2005 and 2006 as well as a rise in the number of employees. Credit loss expenses Credit loss expenses amounted to DKr71m, against a net positive entry of DKr34m in 2005. Lending Banking Activities Sweden continued to expand its lending business in 2006. In local currency, lending to retail customers rose 21%, while lend-ing to corporate customers increased 15%. The growth in corporate lending came primarily from large and medium-sized businesses, whereas sales of home financing products lifted lending to retail customers considerably. Business with the Skan-dia Mäklarna estate-agency chain contributed to a higher number of home financing loans. Deposits In local currency, deposits rose 29% on the figure recorded at the end of 2005. Retail customer de-posits were up 25%, while corporate customer deposits grew 31%.


Awards Banking Activities Sweden received several awards in 2006. For example, Danske Bank Swe-den was named business bank of the year by Fi-nansbarometern, one of Sweden’s largest inde-pendent surveys of the Swedish banking, finance and insurance market. The survey showed that Danske Bank’s business model based on commu-nity involvement and excellent staff qualifications was of decisive importance to Banking Activities Sweden’s success. Market outlook for 2007 Banking Activities Sweden expects to achieve continued growth in 2007 provided that the eco-nomic climate in Sweden remains favourable. Economic growth is expected to be marginally lower than in 2006, however. The expansion of the Swedish branch network in recent years, the organisational adjustments and the acquisition of real-estate agency chains are expected to make the Group's Swedish banking operations well pre-pared for further profitable growth.


Banking Activities Norway Banking Activities Norway encompasses primarily the banking activities of Fokus Bank in Norway. Fokus Bank serves all types of retail and corporate customers. Banking Activities Norway has five regions with 61 branches, five finance centres and around 1,300 employees. Real-estate agency business is carried out primarily through the 40 offices of Fokus Krogsveen. BANKING ACTIVITIES NORWAY Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 1,567 1,286 122 418 410 385 354 354Net fee income 416 377 110 118 90 107 101 106Net trading income 111 61 182 28 33 23 27 9Other income 312 113 276 96 88 74 54 48


Profit before credit loss expenses 854 506 169 233 226 224 171 147Credit loss expenses -31 -73 - 43 -12 -69 7 -8

Profit before tax 885 579 153 190 238 293 164 155

Profit before tax in local currency (NKr) 954 622 153 210 259 308 177 165



• Pre-tax profit up 53% • Profit before credit loss expenses rose 69% • Lending increased 25% in local currency • Growth expected to continue in 2007 The market in 2006 Banking Activities Norway saw strong market growth again in 2006, reflecting the positive in-ternational economic trends and high economic activity in Norway. The year was characterised by rising interest rates, but lending margins remained under pressure because of the fierce competition. The market share of Banking Activities Norway improved in 2006 to 5.6% for lending and 4.4% for deposits, against 5.3% and 4.1%, respectively, in 2005. Income Net interest income rose 22% on the figure re-corded in 2005. The rise was due to a larger vol-ume of business with both existing customers and the many new customers acquired in recent years. This trend more than offset the effect of ongoing competition on interest margins. A small, interest rate-driven increase in deposit margins also con-tributed to the rise in net interest income. Net fee income was up 10%, reflecting the larger business volume.

Other income was up DKr199m to DKr312m, mainly because of the recognition of income gen-erated by Fokus Krogsveen for the full year 2006, against only the second half-year in 2005. With effect from August 1, 2006, Fokus Krogsveen took over the estate-agency chain Nylander. This ac-quisition also contributed to the rise in other in-come. Operating expenses Operating expenses were up 17%, primarily be-cause of the recognition of expenses at Fokus Krogsveen for the full year and the acquisition of Nylander. The recruitment of more employees to serve customers and the reinforcement of central-ised advisory expertise to serve corporate custom-ers contributed to the 5% increase in expenses (excluding expenses incurred by Fokus Krogsveen and Nylander) over the level a year ago. Credit loss expenses Banking Activities Norway recorded a net positive entry for credit loss expenses of DKr31m, against a net positive entry of DKr73m in 2005. The low level of losses was attributable to the favourable economic climate in Norway and the high credit quality of the loan portfolio.


Lending In local currency, lending to retail customers in-creased 8% and lending to corporate customers rose 42% over the level at end-2005. The rise in the business volume of Banking Activities Nor-way came from both new and existing customers. Deposits In local currency, deposits rose 23% on the 2005 figure. Retail customer deposits were up 5%, while corporate customer deposits rose 31%. Focus on customers and advisers In 2006, Banking Activities Norway focused on retail and corporate customers with healthy fi-nances and a need for a wide range of banking services. For staff, Banking Activities Norway focused on recruiting highly qualified and spe-cialised advisers, and the bank is developing, for example, an extensive certification programme for retail customer advisers. Corporate advisers bene-fited from a comprehensive competency devel-opment programme. In December 2006, Fokus Bank entered into an agreement with Sparebanken Vest on the sale of Fokus Bank’s branches in Sogn og Fjordane county in western Norway. The proceeds from the sale will be recognised in the first half of 2007. The sale was a natural consequence of Fokus Bank's strategy of establishing and expanding its business in larger towns. At the end of 2006, Fokus Bank was represented in 18 of the 20 larg-est towns in Norway. Market outlook for 2007 The healthy economic climate in Norway is ex-pected to continue in 2007. Economic growth is expected to be marginally lower than in 2006, however. The development of the Norwegian branch network in recent years, the organisational adjustments and the acquisition of real-estate agency chains are expected to make the Group's Norwegian banking operations well prepared for further profitable growth.


Banking Activities Northern Ireland Banking Activities Northern Ireland encompasses the banking activities of Northern Bank, which serves both retail and corporate customers. Banking Activities Northern Ireland has four regions with 95 branches, four finance centres and around 1,900 employees. BANKING ACTIVITIES NORTHERN IRELAND Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 1,702 1,317 - 451 435 415 401 406Net fee income 485 464 - 122 129 101 133 132Net trading income 87 9 - 22 24 26 15 1Other income 19 20 - 7 5 5 2 1

Total income 2,293 1,810 - 602 593 547 551 540Amortisation of intangible assets 459 374 - 118 118 112 111 111Integration expenses 445 349 - 72 49 194 130 183Other operating expenses 1,449 1,028 - 341 369 390 349 295

Operating expenses 2,353 1,751 - 531 536 696 590 589

Profit before credit loss expenses -60 59 - 71 57 -149 -39 -49Credit loss expenses 44 36 - 30 -2 11 5 2

Profit before tax -104 23 - 41 59 -160 -44 -51

Profit before tax in local currency (£) -9 2 - 4 6 -15 -4 -5


Pre-tax profit as % p.a. of allocated cap. -4.2 1.2 6.5 9.8 -25.3 -6.9 -8.2Cost/income ratio, % 102.6 96.7 88.2 90.4 127.2 107.1 109.1Operating expenses, excl. integra-tion expenses, as % of income 83.2 77.5 76.2 82.1 91.8 83.5 75.2

2005 comprises the months March to December.

• Pre-tax result was a loss of DKr104m • Pre-tax result, excluding integration expenses

and amortisation of intangible assets, rose DKr54m

• Lending increased 41% in local currency • Strong growth expected to continue in 2007 The pre-tax result of Banking Activities Northern Ireland in 2006 was a loss of DKr104m, against a profit of DKr23m for the months of March to De-cember 2005. Excluding integration expenses and amortisation of intangible assets, the pre-tax profit amounted to DKr800m, against DKr746m in 2005. The market in 2006 In 2006, Northern Ireland continued to enjoy good economic growth that generated strong demand for credit facilities among both retail and corpo-rate customers. Intensive competitive pressure resulted in a further narrowing of lending mar-gins, although it was more than offset by the growth in both lending and deposits. Northern Bank’s market share of retail banking was 20%, and its share of corporate banking was 31%.

Income In line with expectations, income rose to DKr2,293m, with growth driven by solid perform-ances in both lending and deposits. Net interest income increased to DKr1,702m and reflected the strong growth of deposits and lending as well as a small, interest rate-driven widening of deposit margins. Operating expenses Operating expenses increased to DKr2,353m, partly as a result of higher integration and market-ing expenses. Amortisation of intangible assets accounted for DKr459m and integration expenses for DKr445m of total operating expenses. The increase in other operating expenses was due to overtime payments and rebranding costs relating to integration. Operating expenses for 2006 also reflected the transition to the Danske Bank IT platform. Credit loss expenses Credit loss expenses amounted to DKr44m for 2006, against DKr36m in 2005. The level of losses reflected the strong economic growth and the persistently high credit quality of the loan portfo-lio with accordingly low impairment charges.


Lending At the end of 2006, lending amounted to DKr58bn, an increase of DKr18bn, of which DKr13bn related to a new method of recognising loans and advances under which loans and ad-vances are no longer netted against deposits held by the same customers. Adjusted for this effect, total lending increased 12%. Deposits Deposits totalled DKr61bn at the end of 2006. Adjusted for the new method of recognising loans and advances, total deposits grew 18%. Customer packages The introduction of new products after Northern Bank’s migration to the Danske Bank IT platform generated solid sales of banking packages. Pack-age sales exceeded expectations, and new cus-tomers accounted for around 30% of sales. North-ern Bank’s product range and price structure are now highly competitive and support its aim to be customers’ first choice in the Northern Ireland market. Market outlook for 2007 The rate of economic growth in Northern Ireland is expected to be high again in 2007. The rebrand-ing of Northern Bank and the successful migration during Easter 2006 have created a strong business trend that, together with marketing campaigns and competitive products and prices, forms the basis for a promising outlook for 2007.


Banking Activities Ireland Banking Activities Ireland encompasses the banking activities of National Irish Bank, which serves both retail and corporate customers. Banking Activities Ireland has five regions with 59 branches and around 700 employees.

BANKING ACTIVITIES IRELAND Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 918 621 - 258 240 219 201 193Net fee income 133 111 - 34 36 28 35 35Net trading income 61 6 - 19 9 19 14 1Other income 6 15 - 2 1 2 1 5

Total income 1,118 753 - 313 286 268 251 234Amortisation of intangible assets 102 85 - 26 25 25 26 25Integration expenses 159 204 - 8 4 68 79 116Other operating expenses 834 566 - 221 184 242 187 179

Operating expenses 1,095 855 - 255 213 335 292 320

Profit before credit loss expenses 23 -102 - 58 73 -67 -41 -86Credit loss expenses -3 4 - - -24 23 -2 -1

Profit before tax 26 -106 - 58 97 -90 -39 -85

Profit before tax in local currency () 4 -14 - 8 13 -12 -5 -11


Pre-tax profit as % p.a. of allocated cap. 1.1 -8.2 8.4 15.7 -16.7 -8.0 -18.7Cost/income ratio, % 97.9 113.5 81.5 74.5 125.0 116.3 136.8Operating expenses, excl. integra-tion expenses, as % of income 83.7 86.5 78.9 73.1 99.6 84.9 87.2

2005 comprises the months March to December.

• Pre-tax profit of DKr26m, against a loss of

DKr106m in 2005 • Pre-tax profit, excluding integration expenses

and amortisation of intangible assets, rose DKr104m

• Lending increased 51% in local currency • Strong growth expected to continue in 2007 The pre-tax profit of Banking Activities Ireland amounted to DKr26m in 2006, against a loss of DKr106m for the months March to December 2005. Excluding integration expenses and amorti-sation of intangible assets, the pre-tax profit amounted to DKr287m, against DKr183m in 2005. The market in 2006 The Republic of Ireland continued to enjoy solid economic growth that generated strong demand for credit facilities among retail and corporate customers. Strong competition put further pres-sure on lending margins, but its effect was more than offset by the growth in both lending and deposits. National Irish Bank lifted its market share of lending from 3% at the end of 2005 to 4% at the end of 2006.

Income Income rose to DKr1,118m, which was in line with expectations. The rise in net interest income reflected strong growth in lending and deposits as well as a small, interest rate-driven widening of deposit margins. Operating expenses Operating expenses rose to DKr1,095m and re-flected expenses for rebranding and activity-based costs deriving from the strong growth in the busi-ness volume. Credit loss expenses Banking Activities Ireland recorded a net positive entry of DKr3m for credit loss expenses, reflecting the positive economic climate and the consis-tently high credit quality of the loan portfolio. Lending Lending amounted to DKr51bn at the end of 2006. Measured in local currency, retail lending grew 52%, while lending to corporate customers was up 50%.


Deposits Deposits totalled DKr21bn at the end of 2006, around the same level as in 2005. However, as deposits from large businesses were transferred to Danske Markets as a result of the conversion at Easter 2006, deposits actually rose about DKr6bn. Migration and new branches In April 2006, National Irish Bank successfully completed its migration to the Danske Bank IT platform. The bank received a number of awards for its work on this project. The growth strategy for banking activities in the Republic of Ireland includes the opening of a number of new branches over the next three years. Market outlook for 2007 The rate of economic growth is expected to slow down marginally in the Republic of Ireland in 2007, although growth is still likely to signifi-cantly outperform average European growth. Lending growth at National Irish Bank is expected to exceed market growth again in 2007.


Other Banking Activities

Other Banking Activities comprises the activities of Nordania and the activities of Danske Bank International S.A., Luxembourg, Hamburg Branch, Poland Branch and Helsinki Branch. OTHER BANKING ACTIVITIES Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 807 755 107 220 202 181 204 200Net fee income 282 230 123 72 67 73 70 60Net trading income 104 91 114 25 21 29 29 21Other income 1,432 1,288 111 403 329 339 361 321


Profit before credit loss expenses 1,054 932 113 303 238 249 264 249Credit loss expenses -254 219 - -104 -101 -24 -25 -58

Profit before tax 1,308 713 183 407 339 273 289 307



PROFIT BEFORE TAX Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Nordania 421 395 107 163 50 80 128 127Other non-Danish banking activities 887 318 279 244 289 193 161 180

Other Banking Activities 1,308 713 183 407 339 273 289 307

• Pre-tax profit of DKr1,308m, against DKr713m

in 2005 • Profit before credit loss expenses rose 13% • Upward trend in all other non-Danish banking

activities Nordania Profit before credit loss expenses at Nordania rose 8% relative to 2005. Net interest income at Nor-dania was 7% lower than in 2005. The decline was due mainly to narrower lending margins re-sulting from keener competition. An increase in operating leases produced a rise in other income at Nordania relative to the result achieved in 2005. Other non-Danish banking activities Profit before credit loss expenses of other non-Danish banking activities rose 17%. All of these units contributed to the improvement, which re-sulted from a positive business trend.

Operating expenses The operating expenses of Other Banking Activi-ties rose 10% on the figure recorded in 2005. The rise was attributable primarily to higher costs deriving from an increase in activity-based costs, enhancement of IT systems and the conversion of Danske Bank’s operations in Poland into a branch. Credit loss expenses Credit loss expenses at Nordania amounted to DKr7m, against DKr4m in 2005. Other non-Danish banking activities recorded a net positive entry of DKr261m for credit loss ex-penses, against an expense of DKr215m in 2005. The 2005 result suffered from a few individual impairment charges that were partially reversed in the third quarter of 2006. The positive trend in 2006 was also attributable to a favourable eco-nomic climate and the high credit quality of the loan portfolio.


Mortgage Finance Mortgage Finance encompasses the Danske Bank Group’s mortgage finance and real-estate agency business in Denmark. The division mar-kets its financing solutions through Realkredit Danmark, Danske Bank, BG Bank and “home”. Real-estate agency business is carried out through “home”, which has 199 offices throughout the country.

MORTGAGE FINANCE Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 3,621 3,423 106 967 899 880 875 887Net fee income -234 83 - -59 -61 -53 -61 12Net trading income 215 195 110 105 53 15 42 46Other income 179 178 101 36 44 47 52 42

Total income 3,781 3,879 97 1,049 935 889 908 987Operating expenses 1,176 1,242 95 301 279 296 300 332

Profit before credit loss expenses 2,605 2,637 99 748 656 593 608 655Credit loss expenses -105 -118 - -19 -23 -53 -10 -24

Profit before tax 2,710 2,755 98 767 679 646 618 679

Mortgage loans, end of period 602,584 569,092 106 602,584 592,784 573,105 567,002 569,092Risk-weighted items (avg.) 287,040 271,182 106 298,500 287,955 282,105 279,380 276,654Allocated capital (avg.) 18,658 17,627 106 19,403 18,717 18,337 18,160 17,983


• Pre-tax profit down 2% • Profit before credit loss expenses fell 1% • Net positive entry for credit loss expenses • Lending increased 6% • Level of activity expected to remain un-

changed in 2007 The market in 2006 In 2006, the Danish mortgage credit market re-turned to a lower and more normal level after a long period of refinancing waves and many prod-uct launches. Total gross lending on the market fell DKr469bn, or 37%, relative to the figure re-corded a year earlier. This fall should be seen in light of a general rise in interest rates that, as expected, led to a cessa-tion of significant interest rate-driven refinancing activity. The lower level of activity in the mortgage credit market was due not only to the rise in interest rates, but also to a decline in property sales. Prices of owner-occupied housing continued to soar, but in the second half of the year, a slow-down set in. Moreover, turnover in the housing market was substantially lower in 2006 than the year before, in particular in the market for owner-occupied flats and holiday homes.

Income The 6% increase in net interest income reflected a rise in administration margins due to a larger loan portfolio. Net fee income declined DKr317m to a negative DKr234m as a result of the decline in refinancing activity and larger payments to Danske Bank and BG Bank for loans arranged through them. Operating expenses Operating expenses fell 5%. The cost/income ratio improved marginally due to the fall in costs. Credit loss expenses Credit loss expenses amounted to a net positive entry of DKr105m, against a net positive entry of DKr118m in 2005. The credit quality of the loan portfolio remained good, with the average loan-to-value ratio at 53% at end-2006, against 58% at end-2005. Lending In 2006, mortgage loans measured at fair value rose DKr33bn to DKr603bn. The outstanding nominal bond debt increased DKr46bn to DKr609bn. Gross lending amounted to DKr145bn in 2006, against DKr224bn the year before. The table provides a breakdown of lending.


Further development of local strategy In 2006, Realkredit Danmark continued to de-velop its local strategy of playing a more active role in the local community. In September, Realkredit Danmark launched its Smart Square Metres sponsorship initiative, awarding grants to schools and companies that give special priority to “physical and functional settings that inspire learning, co-operation and new ideas”.

Market outlook for 2007 The level of activity in the Danish mortgage credit market in 2007 is expected to remain largely un-changed from the level in 2006. The volume of interest rate-driven refinancing is expected to be relatively modest because of a slight rise in inter-est rates in 2007.

KEY FIGURES 2006 2005

Private Corporate Total Private Corporate Total

Loan portfolio, nom., end of year (DKr bn) 378 231 609 348 215 563Share, % 62 38 100 62 38 100Share of interest-only loans, % 39 9 28 33 5 22Market share, gross lending, % 29.9 29.3 29.7 30.5 27.6 29.5Market share, portfolio, end of year, % 33.7 31.3 32.8 34.6 31.6 33.4


Danske Markets

Danske Markets is responsible for the Group’s activities in the financial markets. Trading activities include trading in fixed-income pro-ducts, foreign exchange, equities and interest-bearing securities, providing the largest corporate customers and institutional clients with financial products and advisory services on mergers and acquisitions, and assisting customers in connection with their issue of equity and debt on the international financial markets. Proprietary trading encompasses the Bank’s short-term investments. The investment portfolio covers the Bank’s strategic fixed-income, foreign exchange, and equity portfolios. Institutional banking includes facilities with international financial institutions outside the Nordic region. Institutional facilities with Nordic financial institutions form part of the Group’s banking activities.

DANSKE MARKETS Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Total income 5,535 5,491 101 1,302 1,332 1,191 1,710 1,442Operating expenses 1,950 1,779 110 433 468 500 549 379

Profit before credit loss expenses 3,585 3,712 97 869 864 691 1,161 1,063Credit loss expenses -54 -7 - -5 -16 -25 -8 7

Profit before tax 3,639 3,719 98 874 880 716 1,169 1,056

Loans and advances, end of period 38,718 32,807 118 38,718 38,041 39,399 35,699 32,807Risk-weighted items (avg.) 114,329 99,424 115 118,460 115,520 113,331 109,898 103,167Allocated capital (avg.) 7,431 6,463 115 7,700 7,509 7,367 7,143 6,706


TOTAL INCOME Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Trading activities 3,502 3,068 114 762 840 883 1,017 701Proprietary trading 390 378 103 207 -17 -40 240 8Investment portfolio 1,159 1,589 73 209 375 235 340 615Institutional banking 484 456 106 124 134 113 113 118

Total Danske Markets 5,535 5,491 101 1,302 1,332 1,191 1,710 1,442

• Pre-tax profit down 2% to DKr3,639m, against DKr3,719m in 2005

• Excluding profits from the sale of Handels-Finans in 2005, pre-tax profit was up 11%

• Favourable trend in equity markets in 2006 • High level of activity in 2007 The market in 2006 The year 2006 was generally characterised by central banks’ raising key money market rates. Rates were lifted gradually, however, and over the year as a whole, long-term interest rates rose only moderately. A number of financial markets were fairly vola-tile, with a quite fast rise in long-term bond yields during the spring that led to a sharp – if short-lived – correction in the Nordic equity markets. Overall, the equity markets performed well in 2006, and the Nordic markets all gained in the course of the year. In the foreign exchange market, the US dollar weakened considerably, while the Swedish krona was one of the best-performing currencies.

Danske Markets activities The satisfactory trend in Danske Markets’ activi-ties in the Nordic region continued, and the Group consolidated its position in these markets. As a result of the rise in volatility in both the fixed-income and the equity markets, Danske Markets experienced stronger demand for instru-ments to hedge risk. Demand for Danish as well as international equities also grew. Income Income from trading activities amounted to DKr3,502m, up 14% on the income recorded in 2005. Corporate Finance took part in a large num-ber of mergers, acquisitions and capital market transactions again in 2006, and Acquisition & Leveraged Finance took part in and arranged a number of major debt-financed transactions. Income from proprietary trading rose 3% on the 2005 level.


Income from the investment portfolio was lower in 2006 than in 2005 as the 2005 figure benefited from extraordinary income items, such as the sale of HandelsFinans and of shares in companies providing the financial infrastructure in Denmark and shares in property companies. In 2006, the investment portfolio benefited from exposure to emerging markets equities and its good position-ing for the rise in interest rates in the spring. Income from institutional banking remained satis-factory. Operating expenses Operating expenses rose 10% to DKr1,950m in 2006, mainly because of an increase in activity, including a rise in performance-based compensa-tion and IT costs. Market outlook for 2007 The high level of activity at Danske Markets is expected to continue in 2007. The gradual tight-ening of monetary policy in Europe and elsewhere in the world may, however, cause the markets to be volatile again in 2007. Against this back-ground, Danske Markets does not expect volume growth in the mortgage credit and securities mar-kets to continue at the pace recorded in 2006.


Danske Capital

Danske Capital is responsible for developing wealth management services to the retail banks and manages the funds of retail customers and institutional investors and the funds of Danica Pension, Danske Fund, Puljeinvest (pooled investment) and Flexinvest. The division also provides advisory services to Danske Invest and BG Invest. Through Danske Bank International in Luxembourg, Danske Capital provides wealth management services to clients outside the Group’s home markets. Danske Capital is also responsible for developing asset management products sold through the retail banks and directly to companies, institutional investors and external distributors. DANSKE CAPITAL Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Total income 1,026 893 115 341 225 229 231 307Operating expenses 466 384 121 140 105 109 112 115

Profit before tax 560 509 110 201 120 120 119 192

Risk-weighted items (avg.) 544 149 365 618 814 571 165 128Allocated capital (avg.) 35 10 365 40 53 37 11 8

Cost/income ratio, % 45.4 43.0 41.1 46.7 47.6 48.5 37.5

Assets under management (DKr bn) 491 468 105 491 476 459 473 468

• Pre-tax profit up 10% • Income rose 15% because of product devel-

opment and higher activity level at non-Danish units

• Business trend expected to be positive again in 2007

The market in 2006 The Nordic units of Danske Capital maintained their position in the market for asset management in 2006. The units in Finland, Sweden, Norway and Luxembourg expanded their business seg-ments, while the Danish unit focused on invest-ment solutions for retail and institutional custom-ers. Danske Capital’s market share of unit trust busi-ness targeting Danish retail customers was 33% of total assets at December 31, 2006, against 35% a year earlier. Sales totalled DKr7.4bn in 2006, of which DKr3.5bn derived from Danske Capital units out-side Denmark and DKr3.9bn from units in Den-mark. Income Income was up 15% to DKr1,026m, owing mostly to product development and the increase in ac-tivities outside Denmark. In 2006, Danske Capital earned performance fees of DKr95m, against DKr97m the year before. Income at non-Danish units was 31% higher than in 2005 and the rise was broadly based. Non-Danish units accounted for 25% of income in 2006, against 24% in 2005.

Operating expenses The rise in costs was 21%, owing primarily to an inflow of staff and an increase in activities at non-Danish units. Investment performance Danske Capital’s investment performance in 2006 was satisfactory, with above-benchmark returns in a number of key areas. In equities, Danske Capital strengthened its position with Nordic, European and eastern European equities delivering good returns. Most bond products delivered returns above the benchmark, and credit bonds signifi-cantly outperformed the benchmark. Danske Capi-tal also achieved satisfactory returns on bond- and equity-based hedge funds. For a number of years, Danske Capital has gener-ated satisfactory investment results, owing pri-marily to increased focus on the Group’s principal markets combined with outsourcing of products related to remote markets. In 2006, Danske Capital also launched a number of investment products – most recently Flexinvest Fri, under which Danske Capital carries out the day-to-day management of liquid customer funds, a solution similar to the Flexinvest pension sav-ings scheme. Sales of Flexinvest Fri totalled DKr2.7bn in 2006.


Stronger wealth management As of January 1, 2007, Danske Capital is responsi-ble for developing and providing wealth manage-ment services to all other areas in the Group. Wealth management helps affluent customers optimise their overall financial solution. With the gathering of the Group's wealth management ex-pertise at Danske Capital, the Group seeks to meet the increasing demand for such services. Market outlook for 2007 Danske Capital expects to continue the positive trend in its business in 2007. With the integration of Sampo Bank Asset Management, the unit will further strengthen its international platform.

ASSETS UNDER MANAGEMENT

(DKr bn) Share (%)2006 2005 2006 2005

Equities 154 114 31 24Private equity 11 9 2 2Bonds 315 337 64 72Cash 11 8 2 2

Total 491 468 100 100

BREAKDOWN ON INVESTORS

(DKr bn) Share (%)2006 2005 2006 2005

Life insurance 191 181 39 39Unit trusts - retail 139 140 28 30Pooled schemes 54 45 11 10Institutions, incl. unit trusts 107 102 22 22

Total 491 468 100 100


Danica Pension Danica Pension encompasses all the Danske Bank Group’s activities in the life insurance and pensions market. Marketed under the name of Danica Pension, the unit targets both personal and corporate customers. Products are marketed through a range of distribution channels within the Group, primarily Banking Activities’ outlets and Danica Pension’s insurance brokers and advisers.

DANICA PENSION Index Q4 Q3 Q2 Q1 Q4

(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Share of technical provisions, etc. 1,037 1,127 92 261 252 259 265 290Unit-linked business -53 -25 - -20 -4 -28 -1 6Health and accident business -101 -486 - -7 -28 -30 -36 -526Return on investments 772 783 99 424 408 -86 26 404Financing result -300 -193 - -104 -75 -65 -56 -47Postponed risk allowance - 441 - - 215 -215 - 441

Net income from insurance business 1,355 1,647 82 554 768 -165 198 568

Premiums, insurance contracts 16,232 15,293 106 4,800 3,574 3,599 4,259 4,458Premiums, investment contracts 2,014 1,655 122 731 337 451 495 815Technical provisions (avg.) 176,757 167,406 106 175,674 174,269 177,444 179,639 171,189Allocated capital (avg.) 7,310 8,402 87 5,032 7,657 7,860 8,693 8,631Net income as % of allocated cap. 18.5 19.6 44.0 40.1 -8.4 9.1 26.3

Only 30% of the health and accident insurance results is recognised in the accounts for the first nine months of 2005 in accordance with the profit policy in force at that time.

• Satisfactory rise in gross premiums • Net income from insurance business down

18% • Investment return on customers’ funds was

2.9%, against 12.6% in 2006 • Growth in premiums expected to continue in

2007 Danica Pension saw a sound business trend in 2006 with a rise in gross premiums, including payments under investment contracts, of 8% to DKr18.2bn. Total premiums for the market-based products Danica Balance and Danica Link rose by 87% to DKr6.0bn, against DKr3.2bn in 2005. One effect of this increase was that premiums for Danica Tradi-tionel declined by DKr0.7bn. In 2006, market-based products accounted for 49% of new con-tracts. At the end of 2006, some 72,000 customers had opted for the market-based products. The presentation of Danica Pension’s results has been changed from the 2005 presentation to match the future profit policy, according to which the risk allowance consists exclusively of Danske Bank’s share of technical provisions and does not include the health and accident result. Market position in 2006 In 2006, Danica Pension strengthened its position as the leading supplier of life and pension prod-ucts on the Danish market, partly as a result of declining costs and enhanced efficiency.

The decline in the level of expenses allowed Danica Pension to reduce its prices for Danica Traditionel, Danica Balance and Danica Link in 2006. Activities outside Denmark Danica Pension’s business in Sweden recorded a growth rate of 22%, and premium income stood at DKr1.6bn, against DKr1.3bn in 2005. In Norway, the business volume was at the same level as in 2005, with premium income of DKr0.5bn. Earnings Net income from insurance business fell 18% to DKr1,355m in 2006. Excluding the booking of postponed risk allow-ance of DKr441m in 2005, earnings rose by 12%. Increased position taking in equities helped main-tain the high level of the investment return. The raising of additional subordinated debt reduced allocated capital and thereby the financing result. Moreover, the fall in net income from insurance business was attributable to the change in profit policy in 2006 that reduced the risk allowance. The health and accident result remained unsatis-factory, although better than in 2005, when Danica Pension had to strengthen provisions.


For more information about Danica Pension’s profit policy and consolidation in the accounts of the Danske Bank Group, visit www.danskebank.com/ir. Investment return Danica Traditionel posted a return on invest-ments of customer funds of 2.9% in 2006, against 12.6% in 2005. Given the market conditions and the chosen risk profile, the return was satisfac-tory. In 2006, Danica Pension increased the por-tion of customer funds invested in equities to 23%. As equities provided a return of 15% in 2006, this contributed to a rise in the total return. The return on property holdings was 19.5%. Danica Traditionel customers received interest on their savings at a rate of 4.5%. CUSTOMER FUNDS DANICA TRADITIONEL

Share (%) Return (%) Holdings and returns 2006 2005 2006 2005

Real property 9 8 19.5 11.6Bonds, etc. 68 76 -2.1 11.1Equities 23 16 15.0 24.8

Total 100 100 2.9 12.6

Danica Balance customers with a 75% equity allocation and a medium risk profile saw a return of 10.5% in 2006. The majority of Danica Link customers have chosen Danica Valg, the Danica-managed investment pool, with a medium risk profile, and they achieved a return of 5.3%, against 21.7% in 2005. The collective bonus potential rose by DKr2.6bn to DKr13.9bn at the end of 2006 because increas-ing interest rates reduced provisions by 3.6%. A 30% fall in equity prices would have reduced the collective bonus potential by DKr11.2bn and shareholders’ equity by DKr0.9bn. An increase in interest rates of 1.0 percentage point would have reduced the collective bonus potential by DKr1.2bn and shareholders’ equity by DKr0.1bn. Given the change in the collective bonus potential in 2006 and the forecasts for future returns, Danica Pension fixed the rate of interest on poli-cyholders’ savings at 4.5%. Danica Pension in-tends to apply this rate throughout 2007. Subordinated loan capital In October 2006, Danica Pension issued subordi-nated loan capital in an amount of €0.4bn. Part of it was used to repay existing loans worth DKr2bn and part will be used for continuing expansion.

The subordinated loan capital was rated A+ by Standard & Poor’s. Openness and transparency In 2006, the issue of transparency at life insurance companies received increased attention. Danica Pension contributed to the debate by focusing on clearly exhibiting its cost and risk results on con-ventional products. Furthermore, Danica Pension is the only company in the sector that has pub-lished processing times on its Web site in recent years. In 2006, Danica Pension decided to com-pensate customers if processing times exceeded the targets. Market outlook for 2007 The growth in premiums is expected to continue in 2007. The investment result is not expected to remain at the same high level in 2007 as in 2006, and the financing result will be adversely affected by the raising of subordinated loan capital.


Other areas

Other areas encompasses the Group’s real property activities, unallocated cost of capital and expenses for Group support functions. More-over, the area covers the elimination of returns on own shares.

OTHER AREAS Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income -902 -845 - -224 -292 -189 -197 -283Net fee income -209 -32 - -62 -43 -63 -41 -15Net trading income -249 -306 - -146 -26 48 -125 -142Other income 693 593 - 223 194 240 36 162

Total income -667 -590 - -209 -167 36 -327 -278Operating expenses -7 529 - 152 36 -142 -53 227

Profit before credit loss expenses -660 -1,119 - -361 -203 178 -274 -505Credit loss expenses -1 - - -2 1 - - -

Profit before tax -659 -1,119 - -359 -204 178 -274 -505

PROFIT BEFORE TAX Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Cost of capital -956 -796 - -248 -273 -198 -237 -206Own shares -240 -320 - -134 -54 44 -96 -164Others 537 -3 - 23 123 332 59 -135

Total Other areas -659 -1,119 - -359 -204 178 -274 -505

The pre-tax result of Others was affected by an increase in the cost of capital as a result of the acquisition of Northern Bank and National Irish Bank. The higher profit from Others was attributable to the following factors: the closing of the Group’s Norwegian pension fund, which resulted in a DKr0.2bn reduction of operating expenses; pro-ceeds from the sale of properties, including Realkredit Danmark’s former head office building, of DKr0.1bn; and a reduction of severance pay-ments of DKr0.1bn.


Financial highlights Danske Bank Group

NET PROFIT FOR THE PERIOD Index Q4 Q3 Q2 Q1 Q4(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Net interest income 19,501 17,166 114 5,291 4,924 4,762 4,524 4,432Net fee income 7,301 7,289 100 1,880 1,651 1,806 1,964 2,004Net trading income 6,631 6,351 104 1,537 1,627 1,543 1,924 1,566Other income 2,698 2,255 120 789 675 721 513 599Net income from insurance business 1,355 1,647 82 554 768 -165 198 568

Total income 37,486 34,708 108 10,051 9,645 8,667 9,123 9,169Operating expenses 19,485 18,198 107 5,104 4,642 4,868 4,871 4,960

Profit before credit loss expenses 18,001 16,510 109 4,947 5,003 3,799 4,252 4,209Credit loss expenses -496 -1,096 - 58 -111 -314 -129 -808

Profit before tax 18,497 17,606 105 4,889 5,114 4,113 4,381 5,017

Tax 4,952 4,921 101 1,129 1,416 1,157 1,250 1,283

Net profit for the period 13,545 12,685 107 3,760 3,698 2,956 3,131 3,734

Attributable to minority interests -12 4 - 2 -1 -12 -1 1

BALANCE SHEET Dec. 31, Dec. 31, Index Dec. 31, Sep. 30, June 30, Mar. 31, Dec. 31,(DKr m) 2006 2005 06/05 2006 2006 2006 2006 2005

Bank loans and advances 1,054,322 829,603 127 1,054,322 1,007,570 973,041 860,591 829,603Mortgage loans 602,584 569,092 106 602,584 592,784 573,105 567,002 569,092Trading portfolio assets 490,954 444,521 110 490,954 431,660 394,124 357,484 444,521Investment securities 26,338 28,712 92 26,338 29,035 26,215 31,790 28,712Assets under insurance contracts 194,302 188,342 103 194,302 190,226 181,366 187,732 188,342Other assets 370,861 371,718 100 370,861 401,795 364,677 387,109 371,718

Total assets 2,739,361 2,431,988 113 2,739,361 2,653,070 2,512,528 2,391,708 2,431,988

Due to credit institutions and central banks 564,549 476,363 119 564,549 545,937 470,457 422,092 476,363Deposits 702,943 631,184 111 702,943 677,603 688,845 617,987 631,184Issued mortgage bonds 484,217 438,675 110 484,217 470,227 456,298 446,806 438,675Trading portfolio liabilities 236,524 212,042 112 236,524 229,167 218,920 204,690 212,042Liabilities under insurance contracts 215,793 212,328 102 215,793 213,770 205,805 210,402 212,328Other liabilities 391,212 343,470 114 391,212 399,129 358,577 377,429 343,470Subordinated debt 48,951 43,837 112 48,951 40,358 40,164 41,951 43,837Shareholders' equity 95,172 74,089 128 95,172 76,879 73,462 70,351 74,089

Total liabilities and equity 2,739,361 2,431,988 113 2,739,361 2,653,070 2,512,528 2,391,708 2,431,988

RATIOS AND KEY FIGURES Q4 Q3 Q2 Q1 Q4 2006 2005 2006 2006 2006 2006 2005

Net profit for the period per share, DKr 21.5 20.2 6.0 5.9 4.7 5.0 6.0Diluted net profit for the period per share, DKr 21.4 20.2 5.9 5.9 4.7 5.0 6.0Net profit for the period as % of average shareholders' equity 17.5 18.4 17.6 19.7 16.4 16.8 20.7Cost/income ratio, % 52.0 52.4 50.8 48.1 56.2 53.4 54.1Solvency ratio, incl. net profit for the period, % 11.4 10.3 11.4 9.7 9.8 10.2 10.3Core (tier 1) capital ratio, incl. net profit for the period and hybrid core capital, % 8.6 7.3 8.6 7.1 7.1 7.3 7.3Risk-weighted items, end of period, DKr bn 1,119 944 1,119 1,053 1,019 972 944Share price, end of period, DKr 250.0 221.2 250.0 230.7 221.5 229.0 221.2Book value per share, DKr 139.1 118.2 139.1 123.1 117.5 112.5 118.2Full-time-equivalent staff, end of period 19,253 19,162 19,253 19,384 19,185 19,195 19,162


Accounting policies The Danske Bank Group presents its consolidated accounts in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and approved by the EU and with relevant interpretations issued by the International Finan-cial Reporting Interpretation Committee (IFRIC). Furthermore, the consolidated accounts comply with the requirements for annual reports formu-lated by the Copenhagen Stock Exchange and the Danish FSA. The Group has opted for early adoption of IFRS 7 “Financial Instruments: Disclosures” (August 2005). Adjustment of accounting policies The Group has not changed its accounting poli-cies from those followed in the Annual Report for 2005 except in the instances mentioned below. With effect from January 1, 2006, the Group has adjusted its policies for the recognition of provi-sions for unit-linked insurance contracts to com-ply with the new rules issued by the Danish FSA that complete the framework laid down by IFRS 4. Under the earlier accounting policies, the present value of the future administrative result was rec-ognised at the establishment of a contract. Under the new rules, provisions must, as a minimum, equal the surrender value of a contract. Compara-tive figures have been restated. This adjustment reduced net income from insur-ance business by DKr277m and tax by DKr78m in 2006. The effects on the comparative figures for 2005 were reductions of DKr183m and DKr46m, respectively. The accounting policies effective as of January 1, 2006, led to a decline in the value of other assets of DKr57m, a rise in liabilities under insurance contracts of DKr494m, a decrease in deferred tax liabilities of DKr130m and a lowering of shareholders’ equity of DKr421m. Adjustment of presentation The disclosure of net income from insurance business has been adjusted with effect from Janu-ary 1, 2006, to provide a coherent presentation. The adjustment of technical provisions relating to changes in interest rates and the addition to poli-cyholders’ savings of returns on assets under in-surance contracts and the tax payable on such returns are now recognised as net trading income instead of net insurance benefits. Consequently, net insurance benefits comprise only transactions

with policyholders, whereas net trading income includes both the value adjustment of assets un-der insurance contracts and the return added to policyholders’ savings. Comparative figures have been restated. This adjustment led to an increase in net trading income and net insurance benefits of DKr2,615m (2005: DKr12,975m). The reduction did not affect the net profit for the year or shareholders’ equity.


Income statement Danske Bank Group

(DKr m) 2006 2005

Interest income 106,724 88,904Interest expense 80,626 60,111

Net interest income 26,098 28,793Fee income 9,616 9,158Fee expenses 2,531 2,120Net trading income 6,758 3,895Other income 5,412 3,776Net premiums 16,182 15,252Net insurance benefits 23,641 24,004Income from associated undertakings 389 347Profit on sale of associated and subsidiary undertakings 157 545Staff costs and administrative expenses 18,095 17,030Amortisation and depreciation 2,344 2,102Credit loss expenses -496 -1,096

Profit before tax 18,497 17,606Tax 4,952 4,921

Net profit for the year 13,545 12,685

Portion attributable to: Shareholders of the Parent Company 13,557 12,681Minority interests -12 4

Net profit for the year 13,545 12,685

Net profit for the year per share, DKr 21.5 20.2Diluted net profit for the year per share, DKr 21.4 20.2Proposed dividend per share, DKr 7.75 10.00


Balance sheet Danske Bank Group

(DKr m) 2006 2005

ASSETS

Cash in hand and demand deposits with central banks 12,

announcement of financial results 2006• with effect from april 10, 2007, the bg bank division will...

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